In order to check the robustness of these results, we introduce a variety of changes
to our specification. These include replacing the black market premium with the
measure of the size of the banking sector (bank assets/GDP), adding a measure of
institutional strength (proxied by an index of law and contract enforcement), using
a currency crisis dummy, and dummies for the 1980s to represent the period of the
debt crisis and the ‘lost decade’ for the Latin American countries. Our findings for
FDI and portfolio flows remain fairly robust to these changes. While the
coefficients on bank flows remain negative, they are not always statistically
significant.